Australian Securities and Investments Commission v Beekink

The Relevant Statutory Provisions 9 Section 206C of the Act provides that the Court may disqualify a person from managing corporations for a period that the Court considers appropriate if two conditions are satisfied. 10 The first condition is that a declaration is made under s 1317E that a person has contravened a corporation/scheme civil penalty provision. The second condition is that the Court must be satisfied that disqualification is justified. 11 Chapter 5C of the Act provides for the registration and regulation of managed investment schemes. Part 5C.2 deals with the responsible entity and the duties of the entity, its officers and employees. 12 Section 601FB(1) provides that the responsible entity of a registered scheme is to operate the scheme and perform the functions conferred on it by the scheme's constitution and the Act. 13 Section 601FB(2) confers power on the responsible entity to appoint an agent. However, the responsible entity is taken to have done or failed to do anything that the agent has done or omitted, even if those acts or omissions were fraudulent. 14 Section 601FD provides, relevantly: (1) An officer of the responsible entity of a registered scheme must: (a) act honestly; and (b) exercise the degree of care and diligence that a reasonable person would exercise if they were in the officer's position; and (c) … (d) … (e) … (f) take all steps that a reasonable person would take, if they were in the officer's position, to ensure that the responsible entity complies with: (i) this Act; and (ii) any conditions imposed on the responsible entity's Australian financial services licence; and (iii) the scheme's constitution; and (iv) the scheme's compliance plan. … (3) A person who contravenes, or is involved in a contravention of, subsection (1) contravenes this subsection. Note 1: Section 79 defines involved. Note 2: Subsection (3) is a civil penalty provision (see section 1317E). (4) A person must not intentionally or recklessly contravene, or be involved in a contravention of, subsection (1). 15 Part 9.4B, contained within Chapter 9, deals with the civil consequences of contravening civil penalty provisions. 16 The term "corporation/scheme civil penalty provision" is defined by s 1317DA to mean a provision referred to in s 1317E(1), other than a financial services civil penalty provision. The last mentioned type of provision is not relevant to these proceedings. 17 Section 1317E(1) provides that if a Court is satisfied that a person has contravened one of a number of specified provisions, it must make a declaration of contravention. The specified provisions include s 601FD(3). 18 Section 1317G(1) provides: (1) A Court may order a person to pay the Commonwealth a pecuniary penalty of up to $200,000 if: (a) a declaration of contravention by the person has been made under section 1317E; and (aa) the contravention is of a corporation/scheme civil penalty provision; and (b) the contravention: (i) materially prejudices the interests of the corporation or scheme, or its members; or (ii) materially prejudices the corporation's ability to pay its creditors; or (iii) is serious. 19 Provision is made in s 1317H for the Court to order a person to compensate a registered scheme if the person had contravened a corporation/scheme civil penalty provision. It is a requirement for the making of a compensation order that the damage suffered resulted from the contravention. The Statement of Agreed Facts 20 The trial before the primary judge proceeded on the basis of admissions made by the respondents in a Statement of Agreed Facts. The Statement of Agreed Facts was supplemented by evidence presented by the respondents in the form of personal statements. We will deal below with the statements. Before doing so, it is convenient to refer to the principal parts of the Statement of Agreed Facts. 21 Mr Beekink, Mr Majteles and Mr Gaunt were directors of AMF from 13 September 1999 to 30 May 2000. 22 In December 1999, AMF applied to the Commission to register the Clifton Partners Finance Mortgage Scheme ('the Scheme') as a managed investment scheme under Part 5C.1 of the Act. 23 On 22 December 1999 the Commission registered the Scheme and granted AMF a Dealers Licence to operate the Scheme as the responsible entity. 24 At the time when the Scheme was registered, there was an existing finance broking business owned and operated by Clifton Partners Finance Pty Limited ('Clifton Partners'). 25 The Scheme was registered, and the licence was granted, to enable AMF, as the responsible entity, to offer interests in the form of participation in private mortgage loans originated and managed by Clifton Partners. 26 AMF appointed Clifton Partners to be the custodian of the Scheme assets and to act as AMF's agent in the day to day running of the Scheme. 27 Also on 22 December 1999, AMF lodged a first part prospectus with the Commission, proposing to offer to the public, by specific second part prospectuses, interests in the Scheme, consisting of participation in private mortgage loans originated and managed by Clifton Partners. 28 At the same time, AMF lodged with the Commission a Compliance Plan adopted by AMF for the conduct of the Scheme. The Compliance Plan is an important document and we will refer to it again below. 29 Mr Beekink was appointed as Senior Compliance Officer of the Scheme under the Compliance Plan. He had the responsibility for compliance and administration functions. 30 In addition, with the acquiescence of Mr Majteles and Mr Gaunt, Mr Beekink assumed the power and responsibility to make decisions about the day to day management of AMF including the issue of prospectuses. 31 Commencing in late December 1999, Mr Beekink gave a general authority to Clifton Partners to prepare and execute second part prospectuses for issue by AMF, after review by Mr Beekink. From February 2000 the authority extended to Clifton Partners was to issue the prospectuses " ... without the second part prospectuses first being subjected to detailed review by Mr Beekink or AMF Ltd". 32 Neither Mr Majteles nor Mr Gaunt was aware that this authority had been given to Clifton Partners. 33 On about 3 February 2000 Mr William Harmer, a director of Clifton Partners, pursuant to the authority conferred by Mr Beekink, prepared and executed a second part prospectus seeking to raise $320,000. 34 None of the respondents read the second part prospectus. Nor did they undertake any due diligence on its contents. This was the Prospectus to which we have referred at [5]. 35 The Prospectus was materially false and misleading in at least 14 respects. They included the following: · It implied that the sum of $320,000 would complete the building of the Blackrock Caravan Park when a further $1.6 million had been budgeted for that purpose; · It did not disclose that no repayments to the existing loan had been made out of the borrower's own funds; · It conveyed the representation that the sum of $320,000 would be secured against the completely constructed caravan park with a value of $3.5 million; and · It failed to disclose that projections as to income of the Caravan Park were based on incorrect assumptions, outdated and false financial information, and false and misleading cash flow projections. 36 Mr Harmer of Clifton Partners was convicted of ten counts of making false or misleading statements in connection with the issue of the Prospectus. 37 Investors lent a total of $325,000 pursuant to the Prospectus. They suffered a capital loss on their investment of approximately $207,000. 38 In the last three paragraphs of the Statement of Agreed Facts, Mr Beekink, Mr Majteles and Mr Gaunt admitted to breaches of ss 601FD(1)(f)(b), 601FD(1)(c) and 601FD(1)(f)(iv) of the Act. 39 These breaches were: · failure to provide adequate training to Clifton Partners to ensure they understood their obligations; · failure to take reasonable steps to ensure that AMF read the Prospectus; and · failure to take reasonable steps to ensure that AMF undertook adequate due diligence with respect to material statements in the Prospectus. The Compliance Plan 40 The Compliance Plan states that it was prepared by AMF and that it was initially drafted by Mr Beekink. It states that, following input from Mr Majteles and Mr Gaunt, the Compliance Plan was passed and adopted at an AMF board meeting. 41 Under the heading "Key features of the +scheme", the Compliance Plan states that AMF has ultimate responsibility under the relevant corporations legislation and that it will check compliance by Clifton Partners. It goes on to say that AMF will appoint one of its members to act as Senior Compliance Officer to monitor this compliance. 42 The following appears in the Compliance Plan at [140]-[141]: 140. Each +prospectus or other public offer document is subject to a due diligence procedure whereby all significant material statements, all material assertions and all financial data are subject to review by the board of the +custodian, the +board, independent accountants and legal advisers as appropriate. Prior to a +prospectus being signed, the +board must read the +prospectus and confirm the +prospectus meets the general disclosure test in section 1022 of the +law. 141. Each +prospectus will be reviewed by the +board and the board of the +custodian: … (emphasis added) The Respondents' Statements 43 The respondents put before the trial judge an unsworn personal statement setting out what they wished to say, in addition to the Statement of Agreed Facts, as to the circumstances of the contraventions and their individual personal circumstances. 44 Senior Counsel for the respondents, Mr Zelestis QC, informed the trial judge that the statements were to be treated as statements of the facts because there was no dispute or challenge to their content. There was no cross-examination on the statements. 45 Each of the statements set out the maker's background and professional experience. At the time, each was a partner in the firm of Phillips Fox. Each had substantial experience in property law and general commercial work. 46 Mr Beekink said in his statement that neither Mr Majteles nor Mr Gaunt had the same level of experience as he had in relation to managed investment schemes. He said he always intended to be the director principally responsible for the management of AMF, particularly in the area of compliance. 47 Mr Beekink went on to say that he was confident from his dealings with a senior employee of Clifton Partners, Mr John Frame, that he understood the requirements of disclosure in the Prospectus. He said he relied on Mr Frame to ensure that Clifton Partners' staff understood what matters were material and ought to be disclosed. 48 Mr Beekink repeated in the witness statement two admissions made by him in the Statement of Agreed Facts. The first was that he authorised Clifton Partners to sign the Prospectus after it had been sent to him without Mr Beekink subjecting it to detailed review. The second was that he had not read the Prospectus. 49 The only explanation proffered by him was contained in [119] which was as follows: I am now aware that I misunderstood the full extent of the affirmative obligations on the directors of AMF, as responsible entity. 50 Mr Beekink stated his regrets and undertook to be personally responsible for one half of the investor's capital loss and one half of the costs orders made against the AMF directors. He said this would have significant consequences on his financial position. 51 He also said he was concerned about the prospect of disqualification, in particular his future involvement on company boards and the prospect that he would have to resign from a number of voluntary board positions. Those positions are unremunerated and of a charitable or public nature. 52 Mr Majteles and Mr Gaunt referred in their statements to their reliance upon Mr Beekink. They also stated their wish to ensure that investors be reimbursed, at least for their capital losses. 53 The firm of Phillips Fox undertook responsibility for the remaining 50% of the capital losses and costs not undertaken by Mr Beekink. It did so in recognition of the fact that the respondents undertook their directorships as a result of their positions as partners in the firm. Mr Matjeles was no longer an equity partner and accordingly the assumption of the liability by Phillips Fox had no direct financial impact on him. THE TRIAL JUDGE'S REASONS Mr Majteles and Mr Gaunt 54 The trial judge's reasons dealt first with the pecuniary penalties to be imposed on Mr Majteles and Mr Gaunt. 55 His Honour said at [73] that the culpability of Mr Majteles and Mr Gaunt was that "they neglected their duties and put misplaced reliance" on Mr Beekink, acquiescing in his assumption of power. His Honour also observed that it was patent that neither of them was motivated by personal profit. 56 The learned trial judge went on to say at [74] that Mr Majteles and Mr Gaunt are not persons who lack competence, that they are usually conscientious and that they are clearly remorseful. He then said: … What is required in their case is a penalty sufficient to satisfy the punitive objectives of the applicable law, to be seen to be a personal deterrent and to be apparent as a deterrent to the general public against a repetition of like conduct. 57 His Honour then said that the respondents' qualifications as solicitors suggested a "higher starting point" than that which would have applied to persons without legal qualifications, although "at the lower end of available penalties"; at [75]. 58 His Honour's calculations began with the third contravention, namely lack of due diligence. He considered the appropriate starting point to be $8,000 which he discounted by $2,000 for contrition and "late admissions"; at [76]. 59 The last mentioned reference was to the admission of the three contraventions by the respondents. His Honour took this into account but appears to have given less credit than he would otherwise have granted because he considered that the admissions were given belatedly. 60 The respondents challenge his Honour's finding that the admissions were late. We will deal with this under the heading "Notice of Contention" below. 61 His Honour applied the same approach to the second contravention, that is, failure to take reasonable steps to ensure that AMF read the Prospectus. 62 He considered that the first contravention, failure to provide adequate training, warranted a lower penalty in the amount of $3,000. 63 His Honour then applied the totality principle stated in Mill v The Queen (1988) 166 CLR 59 at 63 to impose a pecuniary penalty of $10,000 on each of Mr Majteles and Mr Gaunt for the first, second and third contraventions. Mr Beekink: Disqualification 64 The trial judge had regard to the admissions in the Statement of Agreed Facts and to Mr Beekink's statement. 65 His Honour referred at [90] to the authority which Mr Beekink gave to Clifton Partners to sign second part prospectuses without those prospectuses first being subjected to Mr Beekink's detailed review. His Honour said: The first defendant does not explain why this step was taken. He does, however, state that he did not draw the granting of this authority to the attention of the second or third defendants. He also accepts that he did not involve the second or third defendants in any aspect of the second part prospectus for the Caravan Park because he did not see the proposed second part prospectus for it. Indeed, he had not become aware that it had been issued until the plaintiff raised issues concerning it. (emphasis added) 66 His Honour went on to say that, in the circumstances, Mr Beekink accepted that he misunderstood the full extent of his affirmative obligation as a director. This is a reference to [119] of Mr Beekink's statement. 67 The learned trial judge referred to the criteria governing the exercise of the Court's power to order disqualification as summarised by Santow J in Re HIH Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80 at 56. The trial judge said at [102] that in applying those factors: · Mr Beekink is a person of exemplary character; · The breaches involved Mr Beekink "in most seriously neglecting his duties;" · Mr Beekink did so because of his misplaced confidence in the ability of employees of Clifton Partners; · The breaches involved Mr Beekink in neglecting his own duties and wrongly granting authority to act to Clifton Partners; and · The breaches also involved failure to inform Mr Majteles and Mr Gaunt and failure to put in place systems to keep them informed. 68 His Honour then found that Mr Beekink is a "professional lawyer of the highest integrity", honest and competent, save for his "complete lapse of attention" to duty in the present case; at [103]. 69 He was of the view that there was no likelihood that Mr Beekink would re-offend and that he would suffer severe hardship from disqualification. The likely consequences of this to Mr Beekink "would be disproportionate to the requirements of either punishment or deterrence"; at [105]. 70 His Honour concluded as follows at [106]: The consequence of these considerations is that, although I regard the first defendant's contraventions as serious, I consider that an order of disqualification in his case would be disproportionate and unmerited in the circumstances. This is because it would not be warranted to protect the public and personal deterrence and is not required by that means. Mr Beekink's Pecuniary Penalty 71 His Honour was of the view that Mr Beekink's conduct was clearly more serious than that of Mr Majteles and Mr Gaunt. He said at [115] that not only did Mr Beekink "… sit by; he also took the step of wrongfully authorising Clifton Partner's [sic] to act." 72 The trial judge considered that the appropriate starting point for the calculation of the penalty for the third contravention was $16,000. He discounted this by $2,000 for the "late admission" and further discounted it by $3,000 in recognition of the financial burden accepted by Mr Beekink; at [115]. 73 His Honour made the same calculation for each of the other contraventions. He then applied the totality principle and reduced the figure to $25,000 for the three breaches. In doing so, he took into account "parity with the second and third defendants"; at [118]-[119]. THE APPEAL: WHETHER HIS HONOUR'S DISCRETION MISCARRIED General Observations: Grounds of appeal 74 The question to be determined is whether his Honour's discretion miscarried in coming to the view that it was not appropriate to disqualify Mr Beekink and in the assessment of the pecuniary penalties. 75 The Commission contends that in failing to disqualify Mr Beekink, His Honour failed to give weight to a number of factors. These include failure to give sufficient weight to the requirement of general deterrence and the seriousness of the conduct. 76 The Commission's grounds of appeal also state that his Honour gave too much weight to other factors such as the personal consequences of disqualification upon Mr Beekink. 77 As to the amounts of the penalties, the grounds of appeal also invite attention to whether his Honour gave insufficient weight to some factors and too much weight to others. 78 The penalty imposed on each of the directors is said to be manifestly inadequate. 79 The factors to which insufficient weight is said to be given on the question of penalty include the need for general deterrence and the seriousness of the contraventions. Disqualification: Mr Beekink 80 In Re HIH at [56] Santow J derived fifteen propositions from earlier authorities as guiding principles or relevant factors in the exercise of the power to order disqualification. In Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 at [48], McHugh J described Santow J's decision as the leading authority on the subject. 81 Although the first four propositions distilled by Santow J go to the public protection nature of the order, proposition (vi) states that the objects of general deterrence are also sought to be achieved. Santow J cited the decision of Australian Securities Commission v Donovan (1998) 28 ACSR 583 at 602 as authority for this principle. 82 The authorities dealing with the exercise of the power were collected in a footnote in the majority judgment in Rich; at [34] n86. The only authority which casts any doubt on the role of general deterrence is the decision of Madgwick J in Australian Securities Commission v Forem-Freeway Enterprises Pty Ltd (1999) 17 ACLC 511 at [41]. 83 In our view, the observations of Madgwick J in Forem-Freeway were limited to the question of the period of any disqualification. In any event, the overwhelming weight of authority is that general deterrence is a factor to be taken into account in deciding whether, and if so for what period, disqualification ought to be imposed. 84 This was explained by McHugh J in Rich at [50]-[52]. His Honour accepted that the authorities show that deterrence, both personal and general, are central factors in determining whether an order for disqualification should be made and, if so, for what period. 85 The principle is well illustrated in the remarks of Cooper J in Donovan at 607-608. His Honour was satisfied that as a personal deterrent and as a deterrent to others "who may be minded to engage in like conduct", a director should be disqualified for a period of three years. 86 Cooper J dealt with the position under the previous terms of the legislation. The section then in force was not identical to the present s 206C of the Act. Nevertheless, the section has its genesis in the provision to which Cooper J referred and, in particular, in the Corporate Law Reform Bill 1992. His Honour cited, at 602, a passage from the Public Exposure Draft and Explanatory Paper of the Bill which states in plain terms the importance of general deterrence. 87 In Re HIH, Santow J dealt with s 206C of the Act when imposing disqualification orders on Mr Adler and Mr Williams. It is noteworthy that his Honour cited the decision of Cooper J in Donovan as an authority for his sixth proposition, namely that general deterrence is an objective. 88 In the present case, the learned primary judge apparently recognised that general deterrence is a factor. He referred at [23] to the observations of Finkelstein J in Australian Securities and Investments Commission v Vizard (2005) 219 ALR 714 at 723. He also referred elsewhere in his judgment to passages from Re HIH. 89 Nevertheless, in our view, with respect to his Honour, it is plain that he did not take general deterrence into account at all when deciding not to make a disqualification order against Mr Beekink. This is clear in the passage at [106] of his Honour's judgment which we have reproduced above. His Honour said that disqualification was not warranted to protect the public and personal deterrence was not required by that means. The absence of any reference to general deterrence shows quite clearly that his Honour did not consider it. 90 Indeed, it is clear from the whole of his Honour's reasoning on the question of disqualification that he paid no regard to general deterrence. The whole tenor of his reasoning was that Mr Beekink is a person of exemplary character who was guilty only of a lapse in attention which was unlikely to recur. 91 It seems to us, with respect, that his Honour gave too much weight to the personal considerations affecting Mr Beekink without considering that part of the protective nature of the order which is concerned with providing a deterrent to other persons involved in the management of corporations. 92 We reject the submission of Mr Zelestis that deterrence is of less importance in cases of neglect or carelessness than in cases of misfeasance. That submission is contrary to the remarks of Cooper J in Donovan at 608. His Honour considered that general deterrence was applicable to those who might be minded to adopt a passive role. 93 In any event, the trial judge specifically found at [115] that Mr Beekink was not guilty only of inaction. His Honour found that Mr Beekink took the step of "wrongfully authorising Clifton Partner's [sic] to act". 94 His Honour's failure to take into account, and failure to give any weight to, the need for the penalty to deter others from engaging in the conduct was an error of principle. As a result of this, and other matters referred to below, the penalty of $25,000, without an associated disqualification order, was manifestly inadequate. 95 The eight criteria to which Santow J referred in Re HIH at 56 as governing the exercise of the power of disqualification include the nature of the breaches. Here, all of the breaches were admitted to be serious. His Honour recognised that Mr Beekink's conduct was more serious than that of his co-directors because he found that Mr Beekink also took the step of wrongfully authorising Clifton Partners to sign the Prospectus. 96 The Commission submitted that the learned trial judge was in error because he failed to give any weight to "the deliberateness" of Mr Beekink's conduct. Mr Zelestis resisted this contention on two preliminary bases. The first was that it was not within the grounds of appeal. The second was that it seeks, impermissibly, to have findings made on appeal which were not made below. 97 We reject both of Mr Zelestis' submissions. The Commission's contention is covered by the ground of appeal that his Honour failed to give weight to the seriousness of the conduct. The "deliberateness" of Mr Beekink's actions merely raises for consideration the intentional nature of his conduct. That falls well within his Honour's finding that Mr Beekink wrongfully authorised Clifton Partners to sign the Prospectus. 98 Mr Zelestis also argued that it was not open to us to consider this ground because it effectively seeks to challenge the explanation given by Mr Beekink that he misunderstood and misapprehended the full extent of his affirmative obligations. He pointed to the absence of cross-examination of Mr Beekink. 99 We do not accept this submission. The Commission does not seek to go behind his Honour's finding that Mr Beekink acted intentionally. Nor does it seek to challenge what Mr Beekink said in [119] of his statement. Rather, the Commission relies only upon his Honour's failure to give any weight to Mr Beekink's intentional misconduct when determining that disqualification was not warranted. 100 In our view, with due respect to his Honour, it is plain that he gave no weight to his own finding of intentional wrongdoing. The considerations which he weighed in coming to the view that disqualification was "disproportionate and unmerited" were limited to acts of omission. He described them variously as a "complete lapse of attention" and "inattention to the circumstances"; see [103]. This is to be contrasted with the finding that Mr Beekink took the positive step of wrongfully conferring authority on Clifton Partners. 101 That was at the heart of Mr Beekink's contraventions. It showed, without more, a failure to take reasonable steps to ensure that AMF read the Prospectus and a failure to take reasonable steps to ensure that AMF undertook due diligence. 102 Moreover, it undermined entirely the protection of the public contemplated by Mr Beekink's own compliance plan. The board of AMF was to read the Prospectus and subject it to review. Mr Beekink was the board member who undertook primary responsibility for this. It was probably his most fundamental obligation. Yet, by his own act, he handed over to the promoter of the Scheme the task of preparing and signing the Prospectus, without himself reading it, or subjecting it to any detailed review. 103 This was a factor which his Honour should have weighed in the balance against the hardship to Mr Beekink of a disqualification order and the unlikelihood that he will re-offend. 104 What is more, his Honour did not consider in the weighing exercise that Mr Beekink gave no explanation for why he conferred authority on Clifton Partners. Yet this was the finding that his Honour made at [90]. 105 Perhaps that finding is to be read in light of his Honour's apparent acceptance, at [91] of the explanation given by Mr Beekink that he misunderstood the full extent of his affirmative obligations. But even if that is so, and even without it being explored in cross-examination, the concession made by Mr Beekink was large. 106 The effect of Mr Beekink's admission in [119] of his statement is that he did not understand that he had an affirmative obligation to see that the board of AMF read the Prospectus and subject it to due diligence. This is notwithstanding that he is a solicitor of the Court and that he drafted the Compliance Plan. Nothing in the other parts of Mr Beekink's statement detracts from the full force of his admission. 107 The lack of any explanation, other than a failure to understand the nature of his legal responsibilities, was a matter going to the seriousness of the breaches and the ability of Mr Beekink to discharge the duties of a director. 108 The trial judge apparently took the view that the breaches were an aberration, out of character and not likely to be repeated. Thus he considered that when balanced against Mr Beekink's exemplary character and strong record of public office, disqualification would be out of proportion to that which was required to protect the public. In coming to that view, his Honour was also influenced by the fact that Mr Beekink would suffer a stigma from disqualification and no dishonesty or personal gain was involved. 109 But when balancing the personal hardship to Mr Beekink against what was required in the public interest, the seriousness of the conduct, coupled with the lack of any explanation apart from a failure to comprehend his duties, were matters which had to be weighed in the balance. 110 In our view the seriousness of the conduct and the lack of any proper explanation for it, coupled with the need for the sentence to take into account the object of general deterrence, point plainly in favour of the exercise of the power to disqualify Mr Beekink from managing corporations for a period of time. 111 We take into account, as his Honour did, that Mr Beekink has made a substantial financial contribution toward the investors' capital losses. Nothing turns on the investors' loss of interest on their money because, as Mr Zelestis correctly submitted, the Commission did not allege causation. 112 The appropriate period for disqualification is a difficult one to determine. The guidance which can be obtained from earlier cases is limited; the factors referred to by Santow J in Re HIH at 56-(xv) are merely guidelines and each case must turn upon its own considerations; One.Tel Ltd (in liq), Re; Australian Securities and Investments Commission v Rich (2003) 44 ACSR 682 at [26], [30] per Bryson J. 113 As Bryson J said in One.Tel, the punitive aspect of the order must be recognised and care must be taken to avoid excessive measures; "(n)o-one should be sacrificed to the public interest" but precision is impossible; at [26]-[32]. 114 In our opinion, weighing all these factors, a period of twelve months is appropriate. Pecuniary Penalty: Mr Beekink 115 The principal purpose of a pecuniary penalty is to act as a personal and general deterrent against the repetition of like conduct. It should be no greater than is necessary in order to achieve this objective; Re HIH at [125], citing Donovan at 608. 116 In assessing the amount of a pecuniary penalty, it is necessary to consider the consequences of an associated disqualification order. If the making of a disqualification order has significant consequences, this may operate as a factor in favour of a lesser penalty; Re HIH at 126. 117 The comments of Bryson J in One.Tel at [26], [30] about the limited guidance from past decisions apply with equal, if not greater, force to the assessment of pecuniary penalties. See also Santow J in Re HIH at [70], citing Hill J in Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd (No 2) [2002] FCA 192 at [34]; andat 126 citing Cooper J in Donovan at 608. 118 There are three difficulties in attempting to classify the amounts of pecuniary penalties by reference to common factors in other cases. First, the breaches tend to take a wide variety of forms. Second, the value of money erodes over time. 119 The third reason is that in recent years the courts have been more concerned with the need for the imposition of higher civil penalties to reflect community expectations of the standards to be imposed on company directors; see for example Finkelstein J in Vizard at [33]. 120 This is particularly so at a time when the commercial community demands ever greater financial rewards from the benefit of public office. The expectation of such rewards must be accompanied by an expectation of higher penalties when those in office slip from the standards imposed upon them under the law. 121 In the present case, the directors do not seem to have had an expectation of large financial rewards. The fees payable to AMF for acting as the responsible entity were not high. 122 Moreover, it is necessary to take into account that we have departed from his Honour's view on disqualification from office. His Honour assessed the penalty upon the basis that there was no associated disqualification order. The approach which must now be adopted is different. 123 His Honour thought that the hardship of disqualification would be severe. He considered at [105] that it would be likely to have an impact on Mr Beekink's professional engagement, because solicitors' work must be discharged without blemish. 124 It may be accepted that disqualification from office will have some impact on Mr Beekink's professional reputation over and above the impact resulting from his contraventions and the pecuniary penalty ordered by his Honour. 125 The Commission asks us to increase the penalty to $50,000 in addition to disqualification. It submits that the figure of $25,000 is manifestly inadequate, inter alia because it ignores the requirements of general deterrence. The Commission submits that his Honour's starting point of $16,000 for each offence is too low and that his Honour's application of the parity principle magnifies the error. This is because it is based upon parity with what are said to be inadequate penalties imposed on the other directors. 126 We accept the Commission's submissions, although it is necessary to adjust the pecuniary penalty having regard to the disqualification order. Upon this approach we accept that his Honour failed to give sufficient weight to the objective of general deterrence and, in particular, did not give adequate weight to the seriousness of the breaches or the fact that Mr Beekink is an experienced solicitor who ought to have been aware of and carried out his obligations. 127 If we had not decided to impose a disqualification order we would have considered that an appropriate pecuniary penalty for Mr Beekink would have been $80,000 to $100,000. This takes into account Mr Beekink's financial contribution to the investors' losses. 128 It seems to us that, allowing for the impact of disqualification, the appropriate pecuniary penalty is $40,000. In coming to this we have applied discounts in proportion to those accepted by his Honour. Pecuniary Penalties: Mr Majteles and Mr Gaunt 129 It is true that his Honour apparently proceeded on the basis that the pecuniary penalty should be sufficient to satisfy the punitive objectives of the law and be seen to be a personal deterrent and a deterrent to the general public; see at [74]. 130 However, in our view, his Honour calculated the penalties from a starting point that was too low because he failed to give any real weight to the seriousness of the breaches. Furthermore, although he said that their qualifications as solicitors suggested a higher starting point, he commenced with a figure of $8,000. 131 The maximum penalty for each offence was $200,000. The figure of $8,000 was so far removed from this as to be considered negligible. 132 His Honour found at [73] that the culpability of Mr Majteles and Mr Gaunt was that they neglected their duties and wrongly acquiesced in Mr Beekink's assumption of power. He appears to have accepted that they did so without putting in place any proper process for Mr Beekink to report to them about the operations of Clifton Partners and the raising of funds through the issue of a Prospectus; see at [30]. 133 His Honour also appears to have accepted that Mr Majteles and Mr Gaunt abrogated their responsibilities; see at [31] and [73]. 134 In those circumstances, we consider that the penalties imposed by his Honour were manifestly inadequate. At the very least they failed to take account the seriousness of the directors' breaches. 135 Taking into account all of the discounts and mitigating factors applied by his Honour in the same proportions, we would double each of the penalties against each of Mr Majteles and Mr Gaunt to $20,000. Notice of Contention: late admissions 136 Mr Zelestis relied upon the events stated by him in his oral submissions at the trial and recorded in the transcript. He submitted that the Commission implicitly accepted the chronology of events outlined by him because counsel made no comment on it in reply before the trial judge. 137 The substance of Mr Zelestis' submission was that the Commission's Statement of Claim alleged contraventions other than those which were eventually admitted. He said that he had "tested the waters" as to the possibility of some arrangement at a directions hearing approximately six months after the proceedings were commenced. 138 Thus he seeks to challenge the trial judge's finding that the admissions were late. 139 We do not consider that any error has been shown in his Honour's finding. His Honour was the docket judge who case managed the matter to the hearing. He was in a better than us to determine that question. 140 In any event, it would be inappropriate to find error on the basis of what was said from the bar table. At very least, what would have been required was evidence as to the whole of the negotiation process, assuming that the directors were prepared to put it forward. Without that, it is impossible to say that his Honour's finding as to the lateness of the admission was wrong. 141 The notice of contention fails. I certify that the preceding one hundred and forty‑one (141) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Mansfield, Jacobson and Siopis.

Counsel for the Appellant: C G Colvin SC with W F Buckley

Solicitor for the Appellant: Australian Securities and Investments Commission

Counsel for the Respondents: C L Zelestis QC with G M Abbott